SIE practice questionhardETFs vs Mutual Funds - Redemption
Which statement best distinguishes ETF share redemption from mutual fund share redemption?
- AETF shares are redeemed in-kind by authorized participants, while mutual fund shares are redeemed in cash by investors✓ Correct answer
- BETF shares can only be redeemed annually
- CMutual funds are redeemed at market price on exchanges
- DETF shares can be redeemed by all retail investors at NAV
Explanation
Why A — ETF shares are redeemed in-kind by authorized participants, while mutual fund shares are redeemed in cash by investors
Authorized participants redeem ETF shares in-kind, maintaining tax efficiency. Mutual fund redemptions occur in cash at NAV; B, C, and D inaccurately describe the process.
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